AP Buyline’s content is created independently of The Associated Press newsroom. Our evaluations and opinions are not influenced by our advertising relationships, but we might earn commissions from our partners’ links in this content. Learn more about our policies and terms here.
In a nutshell
Many high-net-worth individuals who want personalized financial services don’t use standard banks. Instead, they turn to private banks.
- Private banks offer financial planning, as well as tax services, estate planning and various other services.
- These banks aren’t accessible to many Americans due to their high required minimum balances and costs.
- Many banking giants like Citi and Wells Fargo offer private banking services.
What is private banking?
Private banking is a personalized service available to high-net-worth individuals who want to get all their financial needs met in one place.
Unlike everyday banking customers who go through a bank teller or other professional who isn’t specifically assigned to them, private banking clients have a team who knows the ins and outs of their finances. Private bankers are also called “relationship managers.”
Benefits of private banking
Individuals who opt for private banking benefit from personalized services, including tax help and investment management. They also don’t have to go through bank tellers; instead, they have a specific contact person at the bank whom they can call to execute transactions and more. This personalized approach gives private banking clients one place to get help with all aspects of their financial lives — personal finances, business finances or both.
Another big benefit of private banking is access to products, services and rates that aren’t available to other customers. For example, some banks offer certificates of deposit (CDs) with higher rates to private bank clients. They may also be able to invest in alternative investments like private equity and hedge funds that are often inaccessible to people who use other banks.
Pros:
- One-stop shop for all your finances: The main appeal of private banking is that it allows you to take care of all your finances in one place. Private bankers can help manage your deposit accounts, investments, taxes and more for both personal and business finances.
- Access to better rates on deposit products: While traditional banking customers are only able to get the rates on deposit accounts that are advertised by the institutions, private banking clients are often offered higher rates on various products.
- Access to alternative investments: Private banking clients may also get exposure to alternative investments such as private investments in real estate, hedge funds, private credit and private equity.
Cons:
- High minimum requirements and costs: Private banking isn’t accessible to most customers. While the minimum requirements and costs vary from bank to bank, many require at least $1 million in assets and charge fees of 1% per year of the assets under management.
- Potential conflicts of interest: While some financial professionals, like certified financial planners (CFPs), are fiduciaries — meaning they must put your best interests over their own —only some private bankers are. They may be incentivized to sell certain products to their customers.
- Bankers do not have specific expertise: While private banking teams offer a wide variety of financial services, they’re not necessarily specialists. For example, a private bank may offer tax services, but an accounting firm may be able to provide more reliable advice in this area.
How private banking works
High-net-worth individuals can opt for private banking with a well-known bank (such as Chase or Wells Fargo) or a smaller firm. The price, services and minimum balance requirements vary depending on the bank.
Typically, an individual banking professional or team at a bank is assigned to the client to help handle everything from traditional checking and savings accounts to investment management, estate planning, tax services and more. Some banks have products reserved exclusively for their private banking clients and can offer more generous rates than they may be able to offer a traditional banking customer.
Private banks often make their money by charging a fee which is a percentage of their clients’ assets. However, some private banks use other fee structures or earn commissions for selling financial products.
J.P. Morgan Personal Advisors
J.P. Morgan Personal Advisors
Fees
0.50%-0.60% depending on portfolio size
Assets under management
$4.3 trillion
Minimum investment
$25,000
Goal planning
Retirement, travel, buying a home, education, major purchases and custom goals.
Disclosure
INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
How private banking developed and where it's going
Private banking can be traced back centuries to European cities such as London and Amsterdam. According to the 2009 book “The World of Private Banking,” private banks flourished in the late 18th and early 19th centuries, before declining during the Great Depression.
Many successful private banks, including Wall Street’s investment banks and London’s merchant banks, transformed into public companies in the 1960s. Private banking then reemerged in the 1980s, according to The Oxford Handbook of Banking and Financial History.
A 2024 report by The Niche Research found that the market value of global private banking was $482.9 billion in 2023 and is expected to grow to $1,433.8 billion by 2034, a 10.4% compound annual growth rate (CAGR).
Private banking services
Financial planning
Private bankers can help clients make decisions about their biggest financial milestones, such as buying a house, having a child, paying for education and retiring.
Tax services
A key part of financial planning is implementing a smart tax strategy that can help you save money. Private banking teams stay up-to-date on changes in tax laws and can adjust your financial plan as needed.
Estate planning
Managing your money and your future is important, but so is making a plan for your money should you no longer be able to make decisions. Private bankers can help put together that plan for your assets and bring in other professionals — like attorneys — when necessary.
Investment management
While some investors have financial advisers to help with risk management, private banking clients can use their private banker to fill this role. Investment management involves choosing which assets, such as stocks and bonds, to buy, managing your risk and rebalancing your portfolio to adjust your asset allocation.
Preferred rates
Private bankers don’t only help clients choose where to put their money, but they can also offer higher rates than the bank offers other customers on high-yield savings accounts, CDs and more.
Philanthropy
Private bankers can set up a plan for philanthropic contributions for both individuals and businesses.
Lending
Private banks also help clients secure loans, such as those for real estate and luxury items. While some banks will lend directly to these high-net-worth individuals, others have the resources to help arrange a loan with a third party.
Who can benefit from private banking?
There’s a high barrier to entry for private banking because of the high cash minimums required. However, high-net-worth individuals can benefit from private banking if they’re looking for personalized services. Because private bankers tend to know the full details of a client’s financial picture, they can recommend products, services and wealth management tools that will benefit that client specifically.
Private banking can also be beneficial for individuals who want to take a more hands-off approach to their finances and want someone else to manage their money for them.
Eligibility requirements for private banking
Private banking is typically reserved for high-net-worth clients, but what exactly that means varies from bank to bank. The Federal Deposit Insurance Corporation (FDIC) defines private banking accounts as those with at least $1 million — a common benchmark for this type of client service.
If you’re interested in private banking, you’ll have to consider a firm’s specific requirements. For example, Citi Private Bank requires a net worth of $10 million while TD Bank Wealth Private Client Group requires $750,000 or more in investable assets. Some banks also have requirements for specific products reserved for private banking clients, like Wells Fargo’s Private Bank CD which requires a $500,000 minimum opening deposit.
How to choose a private bank
When choosing a private bank, make sure to consider:
- Services: While most private bankers offer a variety of financial planning services, they vary from bank to bank. If you’re most interested in getting better rates on CDs and savings accounts, you want to ask about those offerings upfront. If you’re more interested in estate planning for investment management, ask about how much experience the private banking team has with those services.
- Reputation: If you’re trusting a private bank with your money, you want to make sure it’s reliable. Review the bank’s compliance with banking regulations, stability and client reviews. Large banks like Goldman Sachs, Wells Fargo and Bank of America have been working with private banking clients for years.
- Approach: Private banks have different philosophies that guide how they invest and manage risk. Share your goals and concerns with them and make sure their plans align with how you want your money managed.
- Costs and minimums: Private banks have different minimum requirements and fee structures. Be sure you understand how much you’ll be paying per year and exactly what services you’ll get. You’ll also want to ask about how the private banker is paid to reduce worries about conflicts of interest.
How much does private banking cost?
Private banks vary in terms of how they charge clients, and how much. Some charge based on assets under management (AUM), such as 1% of the total amount of assets they handle. For example, if they manage $1 million for a client, they would charge $10,000 per year.
Other private bankers may charge commissions for sales on products they recommend to clients. This is why it’s important to consider conflicts of interest when you’re choosing a private banker.
Private banks may also charge fees for transactions, exchange fees and more.
The AP Buyline roundup
For high-net-worth individuals looking for help with their overall financial picture, private banking may make sense. These banks can offer a wide range of services plus higher interest rates on products like CDs and savings accounts than traditional banks can offer.
Before hiring a private bank, be sure to consider your goals and whether the bank’s services align with your long-term objectives for your money. For people who can’t afford private bankers — or don’t have the minimum requirements to work with them — a financial adviser or roboadvisor may make more sense.
Frequently asked questions (FAQs)
What qualifications should a private banker have?
Private bankers tend to have a bachelor’s degree and potentially a master’s degree, but they can also have additional qualifications like being a chartered financial analyst (CFA), which requires 4,000 hours of experience completed within three years. Another qualification is the certified financial planner (CFP), which requires 6,000 hours of professional financial planning experience or 4,000 hours of apprenticeship experience.
What’s the difference between private banking and wealth management?
Private banking and wealth management can often overlap, with many institutions offering both. Generally, private banking refers to a wide variety of products and services offered to high-net-worth individuals while wealth management focuses on investment services and building wealth.
Can private banking help with international financial needs?
Yes, private banking can help with international needs. J.P. Morgan Private Bank, for instance, says it can be your “cross-border financial specialist,” staying up-to-date on global tax codes, protocols and regulations.
AP Buyline’s content is created independently of The Associated Press newsroom. Our evaluations and opinions are not influenced by our advertising relationships, but we might earn commissions from our partners’ links in this content. Learn more about our policies and terms here.
